What is Medicare?
Medicare is a federal health insurance program for people 65 and older and younger people with long-term disabilities, permanent kidney failure, or ALS (also known as Lou Gehrig's disease). It provides healthcare benefits to enrollees no matter their income, medical history, or current health status.
President Lyndon B. Johnson signed the 1965 law that created Medicare and Medicaid, and benefits have expanded to cover prescription medications. Today, the Centers for Medicare & Medicaid Services (CMS) oversees Medicare, and the program covers more than 69 million people.
Medicare doesn’t provide for every need. For example, assisted living and long-term care aren’t included. But this insurance does cover a host of preventive, routine, and emergency medical services for older adults and younger people with disabilities.
The uninsured rate for people 65 and older is below 3% now versus nearly 50% in the early 1960s.
Medicare eligibility
The Social Security Administration determines Medicare eligibility. You can qualify for Medicare three ways:
Being age 65 and older while meeting citizenship and residency requirements
Having a disability at any age
Having permanent kidney failure (end-stage renal disease, or ESRD) or amyotrophic lateral sclerosis (ALS, or Lou Gehrig's disease) at any age
Those who qualify for Medicare based on age become eligible to apply 3 months before they turn 65. People younger than 65 who receive Social Security Disability Insurance (SSDI) typically have to wait 2 years to become eligible for Medicare. Those who receive SSDI for permanent kidney failure or ALS become eligible right away with no waiting period.
There are several ways to have Medicare coverage. For example, you can be retired and have Medicare as your primary form of coverage or keep working and make Medicare your secondary payer.
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Medicare Part A
Medicare is divided into parts to cover different areas of healthcare. Medicare Part A is hospital insurance. Medicare Part B is medical insurance for care you receive in a medical outpatient or office setting. Parts A and B together are called original Medicare.
Medicare Part A is designed to pay for the most intensive needs, including:
Limited stays at a skilled nursing facilities after hospitalizations
Hospice care
Some home healthcare
Medicare Part A cost
Most people don’t pay premiums for Part A. You only pay if you or your spouse worked and paid Medicare taxes for less than 10 years. In that case, monthly Part A premiums in 2025 are $285 or $518 (based on your work credit). The monthly cost in 2026 is $311 (if your work credit is 30 to 39 quarters) or $565 (if your work credit is less than 30 quarters).
If you stay in a hospital, you have to pay a portion of your total bill out of pocket before Medicare begins to cover your costs. The initial self-pay part is called the deductible. For 2025, the Part A deductible is $1,676. For 2026, it’s $1,736.
Medicare Part A pays for up to 90 days of hospitalization during each benefit period. The first 60 days of a hospitalization are covered with no patient cost-sharing. This means you pay nothing out of pocket after you meet the deductible. Starting at day 61, there is coinsurance, which is your cost-sharing, and this changes at different stages of your care. You can appeal Medicare payment or coverage decisions.
Also, make sure to sign up for Part A when you’re first eligible. Otherwise, you could face a late enrollment penalty.
Medicare Part B
Medicare Part B covers outpatient doctor visits and other medical care that’s outside of a hospital setting. It also covers medications that aren’t included in other parts of Medicare. Services, medications, and vaccines typically covered under Part B include:
Injectable and infused drugs
Annual flu shot
Pneumococcal (pneumonia) vaccine
Medical equipment such as walkers, wheelchairs, and power scooters
Medicare Part B cost
You have to pay a monthly premium for Part B. Most people pay the standard Part B premium, which is $185 in 2025 and $202.90 in 2026. Enrollees with higher incomes pay more through a surcharge called the income-related monthly adjustment amount (IRMAA). After you meet your annual deductible, there is also 20% coinsurance that you’ll pay for most services.
People with low incomes may qualify for a Medicare Savings Program (MSP). These state-offered programs help with Part B premiums. If you qualify for an MSP, you automatically get Extra Help, which aids with prescription medication costs, too.
If you don’t sign up for Part B when you’re first eligible, you could face a late enrollment penalty.
Medicare Advantage (Part C)
Medicare Part C is best known as Medicare Advantage, and it’s a private alternative to Medicare Parts A and B. In other words, Medicare Advantage is a different way of getting hospital and medical coverage included in original Medicare.
More than half of Medicare enrollees are covered by a Medicare Advantage plan. These private plans bundle Medicare Part A, Part B, and often Part D prescription coverage into their offerings. They often include extras such as routine dental care, vision benefits, hearing aids, or gym membership. By law, Medicare Advantage plans have to provide at least the same level of coverage as original Medicare.
A potential downside of Medicare Advantage is that plans come with network restrictions, so you are typically limited to certain doctors and hospitals in your area. Some plans do allow you to go out of network if you’re willing to pay higher costs. Compare that with enrollees in original Medicare, who can go to almost any healthcare professional or hospital in the U.S.
When you’re turning 65 or during open enrollment, it’s not unusual to have many Medicare Advantage plans available in your local market. For the 2026 coverage year, the average enrollee has 32 standard Medicare Advantage plans with Part D coverage to choose among and seven standard Medicare Advantage plans without Part D.
Medicare Part C cost
Part C costs vary based on the plan you choose, but you must pay your Part B premium even when you have Medicare Advantage. Your out-of-pocket maximum spending for Medicare Advantage plans in 2026 can’t exceed $9,250 for in-network covered services or $13,900 for in-network and out-of-network covered services combined.
You cannot combine Medicare Advantage with Medigap, so there is no supplement insurance to help with Medicare Advantage out-of-pocket costs.
Medicare Part D
Medicare Part D is prescription drug coverage that you can choose to add to original Medicare or a Medicare Advantage plan that doesn’t cover medications — though Part D is included in most Medicare Advantage plans.
Part D plans are optional when you have Medicare. But be careful to avoid a late enrollment penalty if you don’t have other drug coverage once you enroll in Medicare. If you have Medicare Advantage, your prescription medications are typically — but not always — covered by your plan.
Because of the different parts, you may pay two or three Medicare premiums per month. Premiums for Parts B and D likely come out of your Social Security monthly payments.
If you don’t have “creditable” drug coverage from another plan that matches Medicare’s benefits, you can buy a Part D plan from a private company. Premiums vary, and higher-income enrollees may pay more. Plan deductibles can’t exceed $590 in 2025 and $615 in 2026.
You can use the Medicare Plan Finder to compare Part D plans. When you’re deciding on prescription coverage:
Check each formulary — the list of covered medications — to see if the prescriptions you need are included.
Check which pharmacies are “preferred” in your plan’s network. Using those can help lower your costs.
What you pay for medications also depends on what stage of coverage you’re in. Medicare Part D has three stages:
Deductible stage
Post-deductible or initial coverage stage
Catastrophic stage, which occurs after you pay $2,000 out of pocket in 2025 and $2,100 in 2026; after reaching these spending levels, your Part D plan pays 100% for covered medications for the rest of the year
Medicare Part D cost
Medicare Part D has its own premium if you have a stand-alone prescription plan. If you have a Medicare Advantage plan, prescription coverage may be included. If not, you will need to buy a stand-alone plan to have your medications covered. Here’s a summary of Part D costs:
Deductible stage: When you begin accessing your prescription medications in a plan year, you typically have to pay a deductible. If you meet your deductible, your plan begins cost-sharing and you are responsible for copays and coinsurance.
Initial coverage stage: You plan shares costs for your medications, and you pay coinsurance or copays depending on your benefits and your specific prescriptions.
Catastrophic stage: There is a Part D $2,100 out-of-pocket cap in 2026, after which your Medicare prescription plan pays 100% of the costs of your covered medications for the rest of the year.
Medigap supplement insurance
If you have original Medicare, you also may pay a separate premium for a supplemental insurance policy known as Medigap to cover out-of-pocket costs. Depending on the plan you select, your covered costs can include Parts A and B deductibles and coinsurance or excess charges. In some cases, Medigap plans also cover emergency healthcare during international travel. You can’t have a Medigap plan if you are covered by Medicare Advantage.
Frequently asked questions
Medicare has different enrollment periods depending on eligibility. Around the time you turn 65, you have a 7-month initial enrollment period to sign up for Medicare Part A with or without Part B. This starts 3 months before you turn 65, includes your birth month, and ends 3 months after you turn 65. But if you already receive Social Security or railroad retirement benefits when you turn 65, you probably don’t need to sign up. You’ll likely be automatically enrolled in Medicare Parts A and B.
The annual open enrollment period in the fall is when Medicare enrollees can make the most changes to their coverage. This opportunity runs every year from October 15 to December 7. Changes made during this time take effect January 1 of the following year.
Medicare Advantage enrollees have another chance to make changes during Medicare Advantage open enrollment, which lasts for the first three months of the year.
People who need help enrolling in Medicare can call 1-800-MEDICARE (800-633-4227). You can also visit Medicare Interactive or the State Health Insurance Assistance Program (SHIP) for guidance.
Medicare Parts A and B don’t have yearly out-of-pocket caps. Medicare Advantage plans do have annual spending limits, but they can be high — up to $9,250 for in-network services and $13,900 for both in-network and out-of-network services in 2026.
You can choose supplemental insurance (Medigap) only if you have original Medicare. It’s easiest to choose Medigap when you first sign up for Medicare because medical underwriting may be required if you want to buy a plan later, which can cause you to be denied or pay more for coverage.
There are several important changes to original Medicare, Medicare Advantage, and Part D in 2026:
Part D out-of-pocket limit: Your annual spending cap on prescriptions increases from $2,000 in 2025 to $2,100 in 2026 before your plan pays 100% for covered prescriptions for the rest of the year.
Prior authorization pilot: Beginning in January 2026, a 6-year pilot program of coverage reviews for certain Medicare Part B items and services starts for original Medicare enrollees who live in Arizona, New Jersey, Ohio, Oklahoma, Texas, and Washington.
Relief for Plan Finder directory errors: If you used the Medicare Plan Finder and chose a Medicare Advantage plan based on directory errors and then found that your preferred healthcare professionals and facilities are not in your network, you can be eligible for a special election period to choose a different Medicare Advantage plan.
Medicare drug price negotiation: After years of preparation, the Medicare Drug Price Negotiation program will lower prices for 10 brand-name drugs covered by Medicare Part D effective January 1, 2026.
Medicare is a federal program that covers eligible people in the U.S. ages 65 and older as well as younger people with disabilities. Medicaid is a joint federal-state program that provides insurance for people with low incomes in all states, Washington, D.C., and five U.S. territories.
References
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Fuglesten Biniek, J., et al. (2025). Medicare beneficiaries have 32 Medicare Advantage prescription drug plans available, on average, for 2026. KFF.
Holder, K., et al. (2024). Most declines in uninsured rates for all age groups occurred between 2013 and 2019. United States Census Bureau.
KFF. (2025). There are a lot of Medicare Advantage plan options in my area. How do I decide which plan is best for me?
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